BAKU, Azerbaijan, Dec.29
By Tamilla Mammadova – Trend:
The credit profile of Georgia is supported by its track record of high economic growth, robust institutions and a moderate, although rising, debt burden, the Moody's Investors Service (Moody) told Trend.
"These are weighed against its small, relatively low income economy as well as banking sector risk and external vulnerabilities stemming from the economy's reliance on foreign capital inflows," the company said.
According to the Moody, Georgia's strong and improving institutional framework is anchored by close engagement with the European Union (EU, Aaa stable) and International Monetary Fund (IMF).
"In addition, Georgia has growing access to a diverse range of markets through various trade agreements, supporting foreign direct investment (FDI) inflows and economic growth. Georgia's low levels of domestic savings fosters a reliance on external financing, in turn making the economy vulnerable to a tightening in external financing conditions. This is partly offset by Georgia's strong relationships with official creditors, which have provided concessional support to support the economy as it feels the effects of the coronavirus outbreak," the source noted.
As the company said, other key credit challenges include the lack of scale in key sectors of Georgia's economy, which constrains productivity.
Georgia's rating could be upgraded as a result of ongoing and effective reforms that sustainably raise domestic savings, curtailing external vulnerabilities. Economic reforms that foster greater diversification and productivity would enhance growth and potentially support a higher rating, the company said.
"The country's rating could be downgraded if there were an increase in external vulnerability risks, notably a widening gap between domestic savings and investment or an escalation of geo-political risks. A sustained deterioration in fiscal metrics beyond our baseline expectations of the impact of the coronavirus pandemic would also put downward pressure on the rating," the source noted.
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